Abstract
This chapter analyzes the impact of the global crisis on the Spanish financial system between 2007 and 2010. It shows that, overall, the performance of the largest Spanish financial institutions was positive. The chapter examines why and outlines some lessons from the Spanish experience. It contends that this response was largely driven by institutional, political, and cultural factors. Finally, the chapter considers the Spanish experience within the framework of the varieties of capitalism literature. While financial capitalisms have converged toward deregulation as a result of the combined processes of globalization and European integration, this chapter shows that differences persist. Indeed, in the case of Spain the crisis led to extensive regulatory intervention that served to reinforce the pre-existing model.
From: “Why the Spanish Financial System Survived the First Stage of the Global Crisis?” Governance 26, no. 4 (October 2013): 631–56.
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Notes
- 1.
In France, the investment banks connected to the mutuals were also hit very badly (notably Natixis but also Calyon). In the UK, Northern Rock (a building society) was also devastated and a few other building societies were affected badly. Even in Germany, a mortgage lender, HRE, was severely hit, and IKB was the first one to go under in 2007.
- 2.
“¿Por qué Berlín ataca a España?” El País, June 20, 1010.
- 3.
See Victor Mallet, “Prudence Pays Off for Big Banks.” In “Investing in Spain,” special report, Financial Times, October 2, 2009, p. 3.
- 4.
Subsequent events seemed to show that they were not facing up to the reality of the situation, the assumed fall in property prices proved to be overoptimistic.
- 5.
Emilio Botín, “Why Banks Must Adopt a ‘Back-to-Basics Approach’,” Financial Times, special section on the Future of Finance, Monday, October 19, 2009, p. 9.
- 6.
J. Plender, “Respinning the Web,” Financial Times, Monday, June 22, 2009, p. 5. It is important to note, however, that the Spanish model is not complaint with global accounting standards.
- 7.
“Los bancos y cajas disponen aún de un ‘colchón’ extra de 20,000 millones,” El País, Monday, July 26, 2010, p. 15.
- 8.
See “Spain’s Big Banks Continue Their Global Expansion,” in http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=1786&language=english.
- 9.
“Retrato del Poder,” El País, October 20, 2010.
- 10.
Pablo Matín Aceña, Universia Business Review-Actualidad Económica. 150 Aniversario Banco de Santander. November 5, 2007, p. 23.
- 11.
See Emilio Botín, “Sage Advise,” Financial Times, October 16, 2009. In this article, Mr. Botín states “banks must recruit the most talented and ethical people from society. An important lesson of the last two years is just how much people matter. The human factor in leadership, strategy, management, and execution has been the differentiator between good and bad banks. To work for a bank, whether as cashier or chairman, is to assume a huge responsibility: You are safekeeping people’s savings, their security, and their opportunities. Young people entering banking must understand this, and not enter the industry simply because it offers the potential for large financial reward. That requires ethics in character, in culture and in training.” See also Emilio Botín “La Experiencia Internacional del Santander-Central Hispano,” in ICE, April–May 2002, n. 799, p. 122. Santander stresses this culture in their corporate training as well: The “Top 200” senior executives from the group’s global network convene at the Training Center at least once a year to exchange ideas on strategy, risk, technological changes and the main corporate themes of the day, and they are also charged with disseminating corporate culture and values throughout the group. See “Santander fired by education,” Financial Times, March 20, 2006.
- 12.
Emilio Botín, “Why Banks Must Adopt a ‘Back-to-Basics Approach’,” Financial Times, special section on the Future of Finance, Monday, October 19, 2009, p. 9.
- 13.
“Dublin Bail-Out Spooks Investors in Spain,”Financial Times, November 27–28, 2010.
- 14.
According to Reuters Factbox Santander: 4.8 billion euros in 2007 and 8.3 billion in 2008. BBVA had 2.7 billion in 2007 and 4.2 billion in 2008.
- 15.
A recent study from Vicente Cuñat and Luis Garicano shows that the main difference between banks and cajas was not so much the latter’s political nature, but the lower level of professionalization of their managers: only 31% of their presidents has postgraduate studies, half of them had banking experience and half of them have occupied political positions before becoming presidents. According to them, this development means that cajas could have saved 12,000 million euros have they had better prepared and qualified managers and without a political past. Cajas with a political president have on average 0.93 points more of delinquent loans than those who do not, if the president does not have post-graduate studies 0.98 more, with no financial experience 0.93 more, and 2.84 more for those who meet the three conditions. See “La Politizacion eleva la morosidad de las cajas en 12.000 millones,” El País, October 31, 2010.
- 16.
This data has been questioned, as many doubted whether the cajas were still recognizing the reality of their loan problems.
- 17.
Vicente Cuñat and Luís Garicano, “¿Para cuando la reestructuración del sistema financiero español?” El País, September 13, 2009.
- 18.
In Spain, there has been a crucial link between unemployment and the health of the banking sector. The degree of ‘bankarization’ (the proportion of active and passive financial assets from all economic actors with banking intermediaries) of the Spanish economy is one of the highest of the OECD; and the source of business funding outside of the three main financial institutions (banks, cajas and credit cooperatives) is the lowest in the OECD. The increase in unemployment has been expected to cause further damage to financial institutions because it will lead to the further deterioration in the quality of their assets and their capacity to absorb additional risks (more than half the aggregated assets of the Spanish banking system is linked directly or indirectly to real estate assets: loans to families, to companies in that sector or direct real estate assets).
- 19.
Iñigo de Barrón, “El supervisor mete presión a las cajas,” El País, October 18, 2009.
- 20.
Alfonso García Mora, “El gran ausente,” El País, November 22, 2009.
- 21.
“El Banco de España insta a acelerar el cierre de oficinas,” El País, March 26, 2010; and “la banca acumula 60,000 millones en activos inmobiliarios por los morosos,” El País, March 27, 2010. According to the bank of Spain, Banks and cajas have given 445 billion in loans to real estate and construction companies, of this the risk is estimated at 402 (the rest is in investment in roads and trains, port infrastructures, oil, and electricity).
- 22.
In a speech that he gave in Valencia on March 25, 2010, MOFO demanded a reform of the financial system and called on the cajas to seed up the merging processes and close some branches, and demanded a new law to regulate the sector. See “El gobernador saca el mazo,” El País, March 28, 2010; and “El Banco de España insta a acelerar el cierre de oficinas,” El País, March 26, 2010.
- 23.
According to a Citi’s report the only institutions that did not need funds were BBK, Cajastur, Kutxa, Unicaja y Vital. See “El FROB dará a las cajas entre 24,000 y 34,000 millones de euros para recapitalizarse según Citi,” El País, June 7, 2010.
- 24.
“Rato vaticina que al final de la crisis sólo quedaran 20 cajas,” El País, April 14, 2010.
- 25.
“Spanish Banks Break ECB Loan Record,” and “Turmoil in Spain Sparks Fear of Crisis Spreading,” Financial Times, Wednesday, June 16, 2010, p. 15.
- 26.
“Madrid Push for Faster Savings Bank Consolidation,” Financial Times, March 18, 2010, p. 14.
- 27.
“Banks Become the Country’s Biggest Landlords,” Financial Times, Wednesday, June 8, 2010. Special Section on Spain, p. 9.
- 28.
A recent survey from idealista.com found 600,000 completed, unsold new homes in the country, and the crisis is also affecting commercial property.
- 29.
“Crunch Time Looms for Spanish Lenders,” Financial Times, Thursday, March 18, 2010, p. 14.
- 30.
“Madrid Push for Faster Savings Bank Consolidation,” Financial Times, March 18, 2010, p. 14.
- 31.
“Leaning lenders,” Financial Times, Friday, June 4, 2010, p. 9.
- 32.
“Spain to Let cajas Sell 50% of Equity,” Financial Times, July 9, 2010, p. 17.
- 33.
“El Gobierno abre la puerta a la privatización total de las cajas,” El País, July 10, 2010.
- 34.
“El Banco de España exigirá a la banca un nuevo coeficiente de liquidez,” El País, July 14, 2010.
- 35.
Jean-Claude Juncker, chairman of the Eurozone finance ministers group, in “Turmoil in Spain Sparks Fear of Crisis Spreading,” Financial Times, Wednesday, June 16, 2010, p. 15.
- 36.
“New Concerns as Spain’s Borrowing Costs Increase,” New York Times, June 16, 2010, p. 1.
- 37.
“Todos los bancos españoles aprueban los exámenes de resistencia en Europa,” El País, July 23, 2010; “Los bancos y cajas disponen aún de un ‘colchón’ extra de 20,000 millones,” El País, Monday, July 26, 2010, p. 15; and “Premio a la transparencia española,” El País, Tuesday, July 27, 2010, p. 18.
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Royo, S. (2020). The Global Financial Crisis and the Spanish Banking System: Explaining Its Initial Success (2007–2010). In: Why Banks Fail. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-53228-2_5
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